Italy is one of the most beautiful and culturally stimulating countries in the world. Naturally many foreigners dream of buying a piece of real estate in Italy. Maybe you dream of buying a rustic villa in the Tuscany countryside, or maybe you dream of an urban apartment in the heart of Florence. Whatever your dream might be, it should be heartening to know that buying Italian real estate is easier than you might think.
There are no laws in Italy that limit or restrict foreigners from purchasing property in Italy, but it is advisable that foreigners check their country’s applicable (tax) laws concerning buying property abroad before they commence their search.
Below I will explain the various steps foreigners need to take in order to purchase a property in Italy.
Obtain a Codice Fiscale
Before you can purchase an Italian property, as a foreigner, you will need to obtain an Italian tax identification number or Codice Fiscale. This is similar to a Social Security number in the United States. You can request one in Italy, at the Agenzia delle Entrate, or in your home country from the Italian Consulate or Embassy. For more information visit: http://www1.agenziaentrate.gov.it/inglese/italian_taxation/tax_code.htm. In either case you should be issued with a certificate immediately upon approval.
You will also need a Codice Fiscale in order to open a bank account, register for utilities, enter into a tenant’s agreement, obtain an Italian mobile phone number and so on.
Find a property
After taking care of the formalities mentioned above, you are ready to start the fun part of the process - finding your dream property. Before you start the search, though, I always advise my clients to focus in on what exactly they want and need from a property. In addition, you will also want to narrow down locations. If you aren't familiar with specific areas, detail out what you are looking for in an ideal areas (your real estate agent should be able to help you from there). Once you have a clear idea about these two aspects, contact one or more real estate agencies in the area to organise viewings of suitable properties.
The Estate Agent in Italy
In Italy, estate agents are hired by each party independently, and as a result both buyer and seller are required to pay for their agent’s services. There is not a set fee, although a commission of 3% (plus VAT 21%) over the purchase price is considered normal.
Making an Offer
After deciding on the property you want to purchase, the next step is to submit a written offer. When you make your offer you will be expected to make a deposit equal to 5-10% of the contract price. Keep in mind that offers are binding in Italy, which means that until the seller has accepted or declined your offer, you cannot change your mind. This is specifically why the deposit is required, and should the offer be accepted, your deposit will serve as your initial down payment. If your offer is not accepted, the deposit will be returned to you.
In the offer you will be able to specify the price you are offering for the purchase, along with any particular conditions or requests, along with designating time-frames.
The next step, after the offer, is the compromesso (the preliminary deed). This process is very similar to the offer, and provides additional specifications concerning the property and the obligations of both the seller and buyer. As part of the process you will need to make an additional down payment.
The compromesso will need to be registered, and you will be responsible for paying some registration taxes at this point. Although taxes are continuously changing in Italy, currently they amount to a registration fee of €168 and taxes of 0.5% - to be calculated over the deposits made and stamp duty; the actual amount of stamp duty depends on the amount of pages and attachments to the compromesso. At the compromesso you are also generally required to pay the agent’s fee; by law, agents are actually entitled to payment at the moment of signing of the offer by both parties, but typically fees are paid at this point.
The Notary Deed
Last, but not least, there is the Notary’s Deed. As the buyer, you will get to choose the notary, and all costs concerning the Notary’s Deed will be paid by you as well. The Notary is an impartial public official who is responsible for checking all documents regarding the property, and will pass the deed once they are satisfied that everything is in order. As this is the moment in which the actual possession of the property changes hands, this is also the point where you will need to make the final payment to the seller, which generally is done by means of a banker’s check.
Taxes and Notary Fees
At the Notary Deed, you, the buyer, are required to pay various registration taxes, property taxes and the Notary’s fee. How much is to be paid in taxes depends on whether you are purchasing the property as a first or second home. ‘First’ home does not merely mean that you do not own any other property on the Italian peninsula, it also means that you intend taking up residency at the property, within 18 months from purchasing it.
When purchasing from a private person, 3% taxes over the cadastral value (i.e. land registry values) are payable at the notary’s deed, while for second homes 10% is required. If, on the other hand, you purchase from a company or a builder, you will need to pay VAT over the purchase price which of 4% for a first home and 10% for a second home.
Bear in mind that if you resell your property within 5 years from purchase, capital gains tax will be assessed if you purchased the property as a second home, and is also applicable in case of a first home if you were not officially a resident of the property for more than half of the time in which you owned the property.
Another aspect to consider if reselling a primary residence within 5 years, is that you will be required to pay back the ‘tax difference’, i.e. the taxes for the second home which you did not pay at the time of purchase. The only way to avoid paying these taxes is by purchasing another primary residence within 1 year from the sale.
The registration taxes due at the deed are fixed amounts and generally do not amount to more than around €600. The Notary Public charges his fee depending on the purchase price of the property, and fees will differ slightly amongst notaries as well.
Lastly, if you do not speak Italian, you will need the services of an interpreter in order to sign the deed, and you will be responsible for that fee.
After you take possession
Now you are the proud owner of an Italian property, you will need to register for utilities and local taxes. The estate agent should be able to give you a hand with these, as they are not easy to organise if you do not speak Italian. Some estate agents offer after-sales services, and there are also many competent property management agencies around who can take care of these things for you as well.
In Italy you are required to organise your taxes yourself, i.e. you are obliged by law to pay them, but you have to find out yourself what is due and when. Unfortunately the Italian government will not inform you about these beforehand.
If you are not generating any income in Italy (rental income does count as income) you will only need to pay IMU over your property (formerly known as ICI), which is a local tax that affects all property. As the calculations are complicated, it is generally advisable to turn to an accountant to have these calculated. IMU is due in June and in December.
If you are renting out your property, you will also be required to pay IRPEF, which are taxes calculated over your income here in Italy - this is usually due in August and November. Tax laws change frequently here in Italy, and as a result dates and amounts might change, but if you have a good accountant, he or she will be able to let you know when what is due without you needing to worry about it.
Now it's time to sit back, relax and enjoy the Italian lifestyle.
My name is Pauline Ninck Blok, I have been working as an estate agent at Diamante Immobiliare for almost 10 years and in addition to this work freelance as a translator and provide assistance to foreigners struggling with Italian bureaucracy. For more information you can take a look at www.diamanteimmobiliare.com or at www.youritalianconnection.com